BP Expects 8 To 10 Percent Returns From Renewable Energy

In Clean Facts, Environment, Renewable Energy, Sustainability

The oil major BP wants to lead his peers in transition from fossil fuels to a renewable energy energy future however while shifting to low-carbon energy and becoming net-zero by 2050, BP doesn’t want to change: the returns it offers to its investors.


BP is targeting returns of 8 to 10 percent from its low-carbon power business. That compares to an average margin for oil and gas exploration of 8.5 percent, according to NYU’s Stern School of Business.

“Can we deliver the 8 to 10 percent returns from renewables? The answer is very simply: yes,” the new CEO Bernard Looney said this week. “We actually believe we can do better; these returns could turn out to be conservative.”

“We know returns start at around 5 to 6 percent on an equity basis in a competitive auction,” said Looney, adding that there are four factors that could help BP make up the shortfall from there.

Those factors are

  • BP’s projects and operations experience,
  • its power trading capabilities,
  • its ability to eke out better operational efficiency, and
  • its financing capabilities.

Looney said BP’s trading capabilities alone could lift returns by 1 to 2 percent.

Central to BP’s approach will be offering “firm” power-purchase agreements backed by the company’s natural gas as well as renewables, with merchant risk thrown in to boost returns.

BP’s new mantra — is “value over volume.” That approach is evident across the company’s fossil-fuel portfolio, which is being cut by 40 percent, and will also apply to its renewables endeavors.

That said, BP needs to invest now to build its clean power business and reach the scale it is targeting. The target of 50 GW of renewables by 2030 includes an interim 20 GW goal for 2025.

BP’s existing renewables pipeline stands at 20 GW, dominated by solar developer Lightsource BP’s contribution. London-based Lightsource BP’s development pipeline now stretches to 16.1 GW, up tenfold from when BP first took a stake in the business in 2017.

Reference- BP website, Mercom India, Bloomberg, Economic Times

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